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Permanent life insurance: Benefits of a permanent life insurance policy

Permanent life insurance provides protection for lifetime or in certain cases, up to a specific age after which a cash value will be paid to the insured. It is also possible that a permanent life insurance policy can have a cash value built which can be borrowed as a loan or withdrawn for some specific purposes such as children’s college education. This facility of borrowing from the permanent life insurance policy will kick in after a certain period of time by which time cash value would have built up. If the unpaid interest on any loan taken plus any outstanding loan balance exceeds the amount of the permanent life insurance policy’s cash value, the policy and all coverage will be terminated.

Permanent life insurance policies enjoy favorable tax treatment. The cash value built over time has a tax deferral element so long as the permanent life insurance policy is in force. Metlife offers 2 types of permanent life insurance called the Whole life policy and Universal life policy.

Permanent life insurance is best suited for people who need life insurance cover over a longer term.  It is also suited for people who want to accumulate a cash value that can be used for providing education to children, for retirement etc.

The key benefits of permanent life insurance are:

• It may be more economical than term insurance since premiums do not increase with age and also the policy can build cash value. 
• Earnings, and certain withdrawals and loans, may qualify for tax-favored treatment.
• Policy loans and withdrawals provide access to your cash value.
• If the permanent life insurance policy is canceled, the accumulated cash value is paid but taxes may apply.

Some of the drawbacks of permanent life insurance are:

·         They are more expensive than term insurance.

·         Permanent insurance is initially more expensive than term insurance.

·         Usually this policy may not be converted.

·         Any loans taken and unpaid interest reduces the actual protection to the beneficiaries.